Covering The Inbound Tourism Industry Since 1996

Active America China Report

The Jig Is Up: It’s Visa Processing, not Marketing, That’s Driving Increase in Chinese Visitors. This rhetorical bookend—it came across, almost, as a throwaway line—came at the close of a presentation rich in new insights into what is driving the increase in numbers of Chinese visitors to the United States, where they’re coming from in China and the importance of shopping in their itineraries (it is critical) from Dennis Suo, manager of travel industry marketing for the DSG Group.

For Suo, whose title is marketing manager and whose MBA comes from the Asian Institute of Management, the comment was less a critique of marketing; rather, it was an acknowledgement that the impact of last November’s agreement between the governments of China and the USA to extend the term of tourist visas to each other’s countries from one to ten years will have tremendous impact on the arrivals of Chinese visitors to America; they will now be able to make repeat trips, staying longer in each destination and, most important, increase the overall amount of shopping they do because about two-thirds of their travel budget goes toward shopping and the cost of a tour package.

The Five Takeaways: Suo’s presentation drew heavily from data developed by Hong Kong-based DFS, which sells upscale and luxury brands to some 200 million well-to-do travelers each year. It is known principally for its Duty Free Shopping outlets in airports worldwide—with a particular strength in the Asian market. It has 16 airport locations in Asia and 5 in the USA (Los Angeles, New York City, San Francisco and two in Hawaii) as well 14 Galleria brands in downtown locations in major cities worldwide. One was able to leave Suo’s presentation with these five takeaways:

Asian Travelers will continue to make markets all over the world. In a point that has been made by international travel organizations, the growth of the traveling population in Asia—especially in China and India, the world’s two most populous nations—is largely benefitting APAC destinations. Now, with improved visa processing procedures by the U.S. government, as well as the visa agreement between China and the USA,

Predicting where travelers come from and where they will go, especially those from China, is becoming a complex matter. In the case of China, the challenge has been to connect development outside of urban China with travel. The researchers at DSG have been able to predict the growth of a country’s travel market (through its Travel Forecast Model) by looking at factors that include employment, age, head of household income, expenditures; disposable income and urban and non-urban location. After weighting all of the factors, and constructed this formula …

… and has found that urban expenditure is the key factor that drives (or predicts) travel growth. This will be key in expanding outbound travel from unfamiliar (new) markets in China, which has 160 cities with populations of 1 million or more.

Chinese outbound travel is huge, and the growth has only just begun. The number of Chinese travelers. Suo alluded to a World Tourism Organization report in 2006 which predicted that the number of outbound Chinese travelers would reach 100 million by the year 2020. In fact, he noted, Chinese travelers passed that number in 2014. The total should reach 120 million this year and exceed 200 million in 2020.

China is more like a continent than a country. Even people somewhat knowledgeable about China know little about the distinct qualities of its 23 provinces. Most people might be aware of several major cities, such as Beijing, Shanghai and Chengdu, but not of the fact that there are 160 cities within China with a population of more than 1 million. As China’s middle class of potential travelers has grown, it travel-ready population is growing outward from the eastern and southeastern regions of the country to its western, southwestern and northern provinces.

Travel retail will be the growth engine of the retail industry in the future. Suo made several key points regarding the well-known propensity for Chinese travelers and shopping.

Next year, Chinese travelers will spend $160 billion outside China—60 percent of this will be on shopping

Chinese luxury travelers will spend three times shopping abroad what they spend shopping locally

Category

Percentage

Will spend more

56%

Will spend the same

41%

Will spend less

3%

Source: DFS Group

The reasons that Chinese luxury travelers plan to spend more has to do with: increases in traveling budges (78 percent); the chance to buy luxury items abroad (57 percent); gifts for friends (51 percent); gifts for friends/relatives (47 percent).

NOTE: It was no coincidence that Las Vegas, host city for Active America, launched this year’s event with a three-hour reception at the Fashion Show Mall about 7-8 minutes away from the host hotel, the Bellagio, on the same side of the Las Vegas Strip. The musical entertainment and fashion show held specifically for the Chinese tour operators who attended the event, was jammed, and security personnel had to check badges closely in order to prevent curious mall patrons from crashing the reception.